Final Results

Galliford Try PLC 08 September 2005 07:00 AM THURSDAY 08TH SEPTEMBER 2005 GALLIFORD TRY PLC PRELIMINARY STATEMENT FOR THE YEAR ENDED 30 JUNE 2005 HIGHLIGHTS 2005 2004 Increase Group turnover £718m £687m + 5% Profit before tax £26.3m £22.7m + 16% Earnings per share 8.4p 7.2p + 17% Dividend per share 2.1p 1.7p +24% • Construction margin rises to 1.5%, on course for 2% by end of 2006 • Construction work in hand £944 million - 90% on non-price competitive basis • Strong construction cash flow • Housebuilding operating profit at record £26.4 million, margin increases to 14.1% • Current housebuilding sales in hand up 5% on a year ago at £100 million • Over £150 million work in hand for affordable housing sector • Year end gearing down to 15% Commenting today, Tony Palmer, Chairman said: 'I am delighted to report another excellent year, with record financial results. Our construction division is well positioned for sustainable growth in key market sectors. Our positive performance in a difficult housebuilding market reflects the strength of our business model and gives us confidence in our planned expansion. We are in very good financial shape. Our aim is to grow the business organically and by selective acquisition, and we look forward to reporting further progress in the coming year.' For further enquiries please contact: Greg Fitzgerald, Chief Executive Galliford Try plc 01895 855 219 Frank Nelson, Finance Director Galliford Try plc 01895 855 226 Ann-marie Wilkinson Bell Pottinger Corporate & Financial 020 7861 3232 CHAIRMAN'S STATEMENT I am delighted to report another excellent year. We achieved record financial results and are delivering growth in both construction and housebuilding. FINANCIAL REVIEW Profit before tax increased 16% to £26.3 million (2004: £22.7 million). Turnover increased 5% to £718 million in line with our strategy for sustainable growth. Construction operating profits rose 36% to £7.8 million on a turnover of £536 million, with the margin increasing to 1.5%. As our investment in private finance initiative and other forms of public/private partnership projects grows, we have taken the decision to report this activity separately. After allowing for the profit of £1.6m on the sale of our investment in the Birmingham Schools PFI, PPP Investments incurred a net loss of £1.2m (2004: £1.5m loss) as the costs we are incurring to build up the business are expended ahead of a return. Housebuilding, in a difficult market, achieved an increase in its margin to 14.1% and again produced record operating profits, up 4% to £26.4 million on a turnover, including joint ventures, of £188 million. We have a rigorous approach to cash management. Construction continued to generate strong positive cash flows and, with our tightened criteria for land acquisition and controls over work in progress, we have firmly managed the capital employed in housebuilding. Net interest costs for the year were £2.2 million compared to £3.0 million in the previous year, and at 30 June 2005 net borrowings stood at £12.5 million compared to £12.3 million at 30 June 2004, representing gearing of 15% (2004: 17%). Shareholders funds have risen to £86.2 million from £72.3 million at 30 June 2004. Earnings per share for the period were 8.4p compared to 7.2p the previous year. DIVIDEND The directors have taken into account current performance and their confidence in the future prospects for the Group in determining an appropriate level of dividend. Accordingly, the directors are recommending a final dividend of 1.5p per share, an increase of 30% on 2004, resulting in a total dividend up 24% to 2.1p. The directors remain committed to a progressive dividend policy that takes into account earnings growth as well as the need for continued investment in the business. OPERATING REVIEW Construction The construction profit margin has increased again as we benefit from our policy of working in key market sectors. Having risen steadily over the last three years it now stands at 1.5%, and we are well on course to meet our target of 2% by the end of 2006. We are a major provider of infrastructure services to the water and rail industries. Both involve integrated project teams dealing with design, planning, procurement and execution, all to stringent quality and safety standards. We carried out work for Scottish Water, United Utilities and Welsh Water under framework agreements. We are also winning an increasing number of separate contracts based on our framework accreditation, such as the £35 million Holyhead waste water and long sea outfall project that we completed in the year for Welsh Water. We were delighted with our appointment for United Utilities' AMP4 programme of work, building on our established track record with this client. We will carry out around a quarter of their £940 million, five year programme under a framework that could potentially be extended to 2015. In transport infrastructure, we are carrying out more work for Network Rail in the London and Northwest regions following the integration of their building and bridgeguard frameworks. The number of stand alone projects in this sector is also increasing. Significant public investment in health and education continues to be channelled through long term collaborative frameworks. Current work in hand is £149 million, generated both through our investments business and as single projects. Contracts range from health centres for primary care trusts across the country to buildings for a number of universities, including a series of projects at Milton Keynes for the Open University. We are taking advantage of the steady improvement in the commercial market where our track record is generating a number of new opportunities. We recently completed a £19 million mixed scheme for the Corporation of London in Oxford Street. We have commenced our latest project for the All England Lawn Tennis Club at Wimbledon, the reconstruction of the Centre Court buildings to incorporate a retractable roof, due for completion in 2009. We have retained our leading market position in providing construction services to the telecommunications market. We are extending the range of services that we provide to all the UK mobile phone operators, and are encouraged by the prospects for further growth as the uptake of 3G accelerates, requiring additional network capacity. The success we have had in securing frameworks, particularly in water and health, has resulted in a significant increase in construction work in hand. At the end of August it stood at £944 million compared to £621 million a year ago, of which 90% has been secured on a non-price competitive basis and 80% is in the public and regulated sectors. Our objective is to achieve profit growth by expanding the business at a rate that does not compromise margin. PPP Investments PPP Investments role is to take an active equity participation in public/private partnership arrangements for public sector work, with the objective of providing negotiated work for the construction division. During the year we achieved financial close on four such schemes for £120 million of construction work. We are currently working towards financial close on one of the largest multi-school PFI programmes, for Northamptonshire county council, which we anticipate will generate over £150 million of work on 41 schools over a three year period. The intention is to sell equity when projects have reached the stage of generating a consistent income in the operational phase. We sold our PFI investment in Birmingham Schools Partnership (Holdings) Limited during the year which contributed a profit of £1.6 million towards offsetting the significantly higher costs incurred during the year as we grew our presence in the market. We are well placed to take the business forward with the next phase of NHS LIFT projects and Building Schools for the Future. Housebuilding Galliford Try operates as a regional housebuilder with strong local brands in the Southwest, Eastern Counties and the Southeast of England. During the year we completed 853 homes compared to 761 in 2004. The average selling price decreased from £224,000 to £208,000, in line with our strategy of growing the business in the mainstream market. In contrast to the buoyant conditions of the previous year, the market in each of our three regions was more difficult throughout the period. However, our business model, which focuses on individually designed developments, with a particular strength in conversions and brownfield developments, demonstrated its value in reducing the market impact on our business. We have no high rise apartment developments and do not depend on major consortium sites, giving us a competitive advantage in a purchaser driven market and minimising the level of sales incentives required. Good progress on our cost reduction programme is assisting our margins, and we are obtaining better subcontract prices in the current market. Customer care is critical in minimising our after sales costs and supporting our reputation among homebuyers in any market, and we achieved one of the highest scores in independent industry research, with over 90% of our purchasers stating they would recommend us to their best friend. All our developments in the Southeast were on brownfield land during the year, thereby enabling us to sell into the sustainable urban market. In the Eastern counties we made good progress in rebalancing the business to develop more brownfield and urban sites. We secured a site for over 50 homes in Coventry where we could offer the Education Authority a school redevelopment package in partnership with our construction division. There are good opportunities for land acquisition in the current market although we remain selective. Since the year end we have acquired a substantial brownfield site in Osterley, West London of 8 acres for both conversion and new build. In May we acquired the derelict Banstead Hospital in Surrey for conversion into around 100 units. Sites such as these provide regular production over a long period, complementing the smaller sites that form the majority of our outlets. Overall, our landbank at the end of August has risen to 2,605 units compared to 2,520 last year, helped by a good record in achieving planning consents. We are building up our strategic land base, which stands at 695 acres from which we anticipate securing over 2000 plots from 2006 onwards. Since the start of the new financial year there has been an encouraging increase in activity on our sites with sales 42% higher than for the same period in 2004. At the end of August the value of total sales in hand stood at £100 million, 5% above a year ago. In the first half of the new financial year we will be selling from 20% more active sites than in the same period last year, in line with our planned growth. We are therefore confident that we are on track with our strategy for expansion. Affordable Housing Both our construction and housebuilding divisions work in the affordable housing market. In construction, our track record in collaborative working is proving to be a major advantage as affordable housing providers are increasingly entering into longer term partnering arrangements to deliver both their programmes for new build and refurbishment of existing properties. During the year we secured four new framework clients and we believe there is considerable scope for further growth. We are seizing the opportunities that the increased requirements for affordable housing on developments for sale are generating. In the Southwest we are a market leader and, in a joint venture with affordable housing provider Westco, secured planning consent for the redevelopment of Truro Hospital into 190 units, 45% of which will be affordable. We announced in July that we have been pre-qualified by the Housing Corporation for inclusion in the Governments £3.9 billion 'New Partnerships in Affordable Housing' scheme which allows for grant direct to developers. Our affordable housing work in hand across the Group stands at £152 million, we are currently working with 16 affordable housing providers, and have the capability and opportunities to deliver significant growth. PEOPLE The success of our business is driven by the quality and commitment of our people and I continue to be impressed by the first class teams I meet across the Group. As announced in February this year, I shall retire at the forthcoming Annual General Meeting in October after six years as Chairman and am delighted that I will be succeeded by David Calverley. David retired as Chief Executive on 30 June 2005 after 11 years with the business, the last five as Chief Executive of the Group. Greg Fitzgerald, formerly Managing Director of the Housebuilding Division, took over as Chief Executive on 1 July 2005. He is already demonstrating that he has the skills and experience to deliver profitable growth and I am confident that, with our first class executive team, we have the best management in place to take the business forward. Chris Bucknall, our Senior Independent Director for the last two years, becomes Deputy Chairman at the Annual General Meeting. We were delighted to welcome Amanda Burton, Chief Operating Officer for the London region of Clifford Chance and a former Director of Meyer International plc to the Board as a Non-executive Director from 1 July this year. OUTLOOK The prospects for the business have never been better. Our construction division is performing well, it has a strong order book and is positioned for sustained growth in markets with good potential. In housebuilding we have been encouraged by our performance in one of the most difficult markets we have experienced in recent years and by the opportunities that we continue to secure. This gives us confidence in our expansion plans as more consistent markets return in the medium term. Financially we are in very good shape. With our well motivated management team, the aim is to grow the business both organically and by selective acquisition. We look forward to reporting further progress in the coming year. Tony Palmer Chairman 8 September 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 30 June 2005 Turnover Note 2005 2004 £000 £000 Continuing operations 726,238 695,400 Less share of joint ventures' turnover (7,744) (7,902) --------- ----------- Group turnover 2 718,494 687,498 Cost of sales (654,464) (629,197) --------- ----------- Gross profit 64,030 58,301 Net operating expenses (37,163) (33,850) --------- ----------- Group operating profit 2 26,867 24,451 Share of operating profits in joint ventures 26 1,324 Income from other participating interests 100 - Profit/(loss) on sale of fixed asset investments 1,562 (27) --------- ----------- Profit on ordinary activities before interest 2 28,555 25,748 Net interest payable - Group (1,603) (2,224) - Joint ventures (622) (820) --------- ----------- (2,225) (3,044) --------- ----------- Profit on ordinary activities before tax 26,330 22,704 Tax (7,738) (7,084) --------- ----------- Profit for the financial year 5 18,592 15,620 Dividends (4,672) (3,756) --------- ----------- Retained profit for the year 13,920 11,864 --------- ----------- Earnings per ordinary share 3 8.4p 7.2p --------- ----------- Diluted earnings per ordinary share 3 8.1p 6.9p --------- ----------- Dividend per ordinary share 5 2.1p 1.7p --------- ----------- All of the Group's activities are continuing. There was no material difference between the profit on ordinary activities before tax and the retained profit for the year stated above and their historical cost equivalents. There were no gains and losses in the year other than those shown in the profit and loss account. CONSOLIDATED BALANCE SHEET at 30 June 2005 2005 2004 £000 £000 Fixed assets Tangible assets 11,630 11,936 Investments in joint ventures: Share of gross assets 11,831 10,739 Share of gross liabilities (9,751) (8,480) ------------ ---------- 2,080 2,259 Investments in associates 31 31 Other investments 468 608 ------------ ---------- 14,209 14,834 Current assets Stocks 613 795 Developments 209,247 177,392 Debtors 103,228 107,932 Current asset investment 3,412 - Cash at bank & in hand 2,007 2,570 ------------ ---------- 318,507 288,689 Creditors: amounts falling due within one year Borrowings falling due within one year (16,769) (13,648) Other amounts falling due within one year (221,902) (211,552) ------------ ---------- (238,671) (225,200) Net current assets 79,836 63,489 ------------ ---------- Total assets less current liabilities 94,045 78,323 Creditors: amounts falling due after more than one year (4,750) (3,108) Provisions for liabilities and charges (3,059) (2,928) ------------ ---------- Net assets 86,236 72,287 ------------ ---------- Capital and reserves Called up share capital 11,340 11,239 Share premium account 2,295 2,196 Merger reserve 4,687 4,687 Revaluation reserve 1,789 1,909 Profit and loss account 66,125 52,256 ------------ ---------- Equity shareholders' funds 86,236 72,287 ------------ ---------- CONSOLIDATED CASH FLOW STATEMENT for the year ended 30 June 2005 2005 2004 Note £000 £000 £000 £000 Net cash inflow from operating activities 4(a) 13,785 17,107 Dividends from other participating 100 - interests Returns on investments and servicing of finance: Interest received 674 660 Interest paid (2,204) (2,299) Loan note interest paid (46) (328) ------- ------- ------- ------- Net cash outflow from returns on investments and servicing of finance (1,576) (1,967) Taxation (8,472) (5,620) Capital expenditure and financial investment: Purchase of tangible fixed assets (1,598) (1,821) Sale of tangible fixed assets 29 601 ------- ------- ------- ------- Net cash outflow for capital expenditure and financial investment (1,569) (1,220) Acquisitions and disposals: Increase in own shares held by Galliford Try Employee Trust (450) Increase in investment in joint ventures (75) - Increase in other investments (69) (103) Realisation of investment in joint ventures 35 115 Realisation of investment in associates - 17 Realisation of other investments 1,771 - ------- ------- ------- ------- Net cash inflow for acquisitions and disposals 1,212 29 Equity dividends paid (3,875) (3,423) ------- ------- ------- ------- Net cash (outflow)/inflow before use of liquid resources and financing (395) 4,906 Management of liquid resources: Increase in short term deposit with bank (3,412) - Financing: Issue of ordinary share capital 200 610 Increase in other loans 12 - Decrease in bank loans (67) (24,151) Repayment of loan notes (3,881) (16) ------- ------- (3,736) (23,557) ------- ------- ------- ------- Decrease in cash (7,543) (18,651) ------- ------- ------- ------- Reconciliation of net cash flow to movement in net debt Decrease in cash (7,543) (18,651) Decrease in debt 3,936 24,167 Increase in short term deposits with banks 3,412 - ------- ------- ------- ------- Change in net debt (195) 5,516 Net debt at start of the year (12,309) (17,825) ------- ------- ------- ------- Net debt at end of the year 4(b) (12,504) (12,309) ------- ------- ------- ------- NOTES TO THE PRELIMINARY STATEMENT 1. Basis of Preparation This preliminary statement has been agreed with the Company's auditors, and does not constitute statutory accounts for the Company. It has been extracted from the annual accounts of Galliford Try plc, which have not yet been filed with the Registrar of Companies. The financial information for the year ended 30 June 2004 has been extracted from the statutory accounts for that year on which the auditors gave an unqualified audit report and which have been filed with the Registrar of Companies. 2. Segmental analysis Turnover 2005 Turnover 2004 including including joint Joint joint Joint ventures ventures Group ventures ventures Group £000 £000 £000 £000 £000 £000 Construction 537,733 1,714 536,019 512,905 1,610 511,295 PPP Investment - - - - - - Housebuilding 187,991 6,030 181,961 182,031 6,292 175,739 Group 514 - 514 464 - 464 -------- -------- -------- -------- -------- ------- Total 726,238 7,744 718,494 695,400 7,902 687,498 -------- -------- -------- -------- -------- ------- All turnover arose in the United Kingdom Profit/(loss) Net assets/(liabilities) before interest 2005 2004 2005 2004 £000 £000 £000 £000 Construction 7,847 5,750 (40,569) (16,934) PPP Investment (1,179) (1,532) 733 - Housebuilding 26,430 25,470 134,907 103,590 Group (4,543) (3,940) 3,669 (2,060) -------- -------- -------- --------- Sub-total 28,555 25,748 98,740 84,596 -------- -------- Net debt (12,504) (12,309) -------- -------- -------- --------- 86,236 72,287 -------- -------- -------- --------- The share of profits in the joint ventures relating to construction of £188,000 (2004: £297,000), PPP Investment losses of £28,000 (2004: £Nil) and housebuilding losses of £134,000 (2004: profit £1,027,000) are included in profit/(loss) before interest. The share of net assets/(liabilities) relating to the joint ventures included in construction, PPP Investment and housebuilding are £466,000 (2004: £273,000), £(28,000) (2004: £Nil) and £1,642,000 (2004: £1,986,000) respectively. The Group sold its interest in Birmingham Schools Partnership (Group) Limited resulting in a profit of £1,562,000. 3. Earnings per share Basic earnings per share is calculated using the profit on ordinary activities after tax and the weighted average number of ordinary shares in issue during the year less the weighted average number of shares held by the Galliford Try Employee Share Trust which have not unconditionally vested in employees. For diluted earnings per share the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential ordinary shares. 4. Notes to the cash flow statement a) Reconciliation of operating profit to cash flows 2005 2004 £000 £000 Operating profit 26,867 24,451 Depreciation 1,821 1,642 Charge for employee share options 279 82 Loss/(profit) on disposal on tangible fixed assets 54 (150) Amortisation of goodwill - 167 Decrease/(increase) in stocks 182 (347) Increase in developments (31,855) (28,840) Decrease in debtors 4,694 8,423 Increase in creditors 11,743 11,679 ---------- ---------- Net cash inflow from operating activities 13,785 17,107 ---------- ---------- b) Analysis of changes in net debt At 1 July Cash At 30 June 2004 flow 2005 £000 £000 £000 Cash at bank and in hand 2,570 (563) 2,007 Overdrafts (8,760) (6,980) (15,740) ---------- ---------- ---------- (6,190) (7,543) (13,733) Debt due after one year (5,035) 3,881 (1,154) Debt due within one year (1,084) 55 (1,029) Liquid resources - 3,412 3,412 ---------- ---------- ---------- Net debt (12,309) (195) (12,504) ---------- ---------- ---------- 5. Final Dividend The directors are recommending a final dividend of 1.5p per share (2004: 1.15p) which, together with the interim dividend paid of 0.6p per share (2004: 0.55p), brings the total dividend in respect of 2005 to 2.1p (2004: 1.7p). Subject to approval at the Annual General Meeting to be held on Friday 28 October 2005, the final dividend of 1.5p per share will be paid on 4 November 2005 to shareholders on the register on 7 October 2005. This information is provided by RNS The company news service from the London Stock Exchange

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